CAP Reforms in the 1990s and their Price and Welfare Implications: The Case of Wheat

Stanley Thompson (), Wolfgang Gohout and Roland Herrmann

Journal of Agricultural Economics, 2002, vol. 53, issue 1, 1-13

Abstract: We use a nonlinear commodity market model to assess, theoretically and empirically, the impacts of recent reforms of the CAP on prices and economic welfare in the EU. The empirical analysis is based on an aggregate structural econometric model of the EU wheat economy and its links to the rest of the world. Instability issues are also investigated. Impacts of CAP reforms on the variance of domestic and world prices are analysed and a Monte Carlo simulation is used to evaluate uncertainty in the model's welfare computations. Recent reforms led to a net welfare gain within the EU during the period 1993–2000. Additional budgetary costs are less than the welfare gains of consumers and producers. Producers gained as lower price support was overcompensated by additional direct payments.

Date: 2002
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